The federal government’s share of the US economy rose from 9% in 1927 to almost 30% in 2007, spawning numerous studies into the natures and causes of government growth. Niskanen (1971) introduces the idea of the self-interested bureaucrat who, using private information not shared by politicians, secures an inefficiently large budget. While Niskanen’s conclusions have been debated extensively in the literature, perhaps due to a lack of data, bureaucrats’ information advantages have been less so.
The goal of this analysis is to study the effect of information advantage on budget size by using newly available data on bureaucratic transparency as an inverse proxy for information advantage. By modeling transparency as a variable the bureaucrat can affect, this research incorporates imperfect information into the bureaucrat’s budget-maximizing behavioral model. The resulting model is examined to gain insights into the bureaucrat’s optimal behavior. Lastly, we use data on transparency and information relevance to test for the results that our theoretical model predicts.
Past researchers have attempted to explain the growth of government as a result of a complicated revenue structure that hides the full cost of government (Buchanan 1967; Goetz 1977; Pommerehne and Schneider, 1978), in terms of voter models (Downs 1957; Black 1958; Busch and Denzau 1977), and as a natural outcome of the institutions and procedures of the U.S. Congress (Ferejohn 1974; Fiorina and Noll 1978). Niskanen (1968, 1971, 1975) formally modeled the bureaucrat’s behavior where the bureaucrat maximizes utility by maximizing his agency’s budgets. He finds that bureaucrats succeed in enlarging their budgets because bureaucrats possess private information not available to the politicians who set their budgets, and bureaucrats receive lump-sum budget appropriations rather than “per unit” appropriations.
